Losing litres would not raise milk value, according to the first objective analysis into the possible consequences of downsizing Britain's milk production.

NFU Scotland vice president Jim McLaren said that he welcomed the MDC report, saying it provided no simple answers but indicated that reducing production was "not the panacea that some would suggest".

The report warns British farmers that there is no "straightforward" solution to low profitability. It suggests that innovation and renegotiating contracts to recognise greater efficiency would be a better way of improving earnings than simply reducing supply, which would mean losing thousands of dairy farmers.

"British dairy farmers

are among the most efficient in Europe, but we're not saying we're perfect.

We must look at every cost and strive to stay efficient," said McLaren.

But with supplies of winter forage already well depleted because the hot weather destroyed grazing, dairy farmers will need a price rise if they are to last through the autumn, according to Gwyn Jones, chairman of the NFU dairy board. "We have to pass costs on up the supply chain like any other industry. We need to have a mechanism to get more money back on farm by this autumn or we'll see people leaving dairying in droves."

He forecast extra costs

of tens of thousands of pounds to keep animals fed, and said that the squeeze on profits was endangering animal welfare as farmers struggled to pay vets.

"Society should be asked what sort of dairy farming it wants. If people don't like what they see, they need to shout before it's too late."

NFU chief dairy adviser, Tom Hind, admitted the report did not offer any specific initiatives, but he said it drew a line under comments by processors that the UK would benefit from losing 'surplus' production.